Hebei Iron & Steel Group Co Ltd, China's largest steel mill in terms of production capacity, said it would cut its annual output by 6% to help meet the nation's target to reduce carbon dioxide emissions by up to 45% by 2020.

The company said that its crude steel output would fall by 1.5Mt between September and December this year.

The company's move comes against the backdrop of cuts in steel output ordered across Hebei to help meet the green goal.

Xu Xiangchun, chief information officer of Mysteel Research Institute, told China Daily that the production cuts in Hebei province were too harsh and would harm the industry.

"The 40% cut in steel output can only be a temporary measure and, as such, will only make a limited and short-term contribution to the nation's emission reduction effort," Xu said.

Analysts said the output cuts are not only affecting steel mills' production plans, but are also taking their toll on iron ore demand.

Salespersons from Rio Tinto, Vale and BHP Billiton have started to contact their clients in Hebei province, seeking more details about the production cuts, China Securities Journal reported.

According to data from the General Administration of Customs, China imported 44.6Mt of iron ore in August, 10.2% lower year on year. The import price of iron ore has also dropped by about $10/t since August, to $147/t.

Domestic media reported the price of steel had dropped by 17% from April to July, while the price of iron ore had dropped 23% in the same period.

According to China Iron and Steel Association, 40% of the nation's steel mills have been affected by the government's macro-control policies

Source: China Daily